The tax-holiday regime for Non-Habitual Residents (NHR), launched in 2009 to entice wealthy foreigners to participate to Portugal’s economic development in exchange for low or no taxation, reveals a very asymmetrical distribution between the two NHR target groups: “value-added” professionals and pensioners. Amongst the 27,367 beneficiaries of the NHR statute allowing for a partial or complete 10-year tax holiday in Portugal, there are only 2,140 “value-added” professionals (8%). Of these, almost half are senior executives of multinational companies. Continue reading →

The “VPT” of your property is not directly related to construction costs or its market value (except for the soon-to-be-overhauled Location Coefficient). The Property Evaluation System (“Valor Patrimonial Tributário or VPT”) is a mathematical formula comprised of six factors, working as follows:

Attentive to Local Lodging activities, the tax man is tightening its grip on owners who fail to report and pay their taxes. Online platforms may soon be required to share information on customers, according to the Jornal de Notícias. The aim of the Portuguese Revenue is to avoid fraud and tax evasion. To this end, the ministry is studying ways to force the holiday letting reservation platforms to report “AL” operator data to Finanças.

The new regulatory restrictions implemented since October of last year have failed to slow demand for central Lisbon properties. While new Local Lodging applications dropped by 60%, foreign investors continue to seek out and buy property in historical districts as real estate sales soared by 38% over the period. While the “AL” sector is still significant, there are clearly other factors driving the market as well.

The “AT” (Tax Authority) has revealed plans to review the Location Coefficient (“CL”) of immovable properties by the end of August. The new localisation factor will be approved by the end of the year, coming into effect in January 2020. Finanças targets updates to the Ratable Value of real estate (“VPT”) at 85% of average property prices in each location.

Over the past seven years, the state has brought in more than 167 million Euros with the issuance and renewal of Golden Visas. The fees charged by “SEF” (“Serviço de Estrangeiros e Fronteiras”) are the result of more than 19,000 visas issued and over 17,000 renewals, a retention rate of almost 90% of investors and households.

There are almost 4 million demands for Municipal Tax on Real Estate (“IMI”) being issued this year. Nearly one million property rates fall below €100. This annual tax is levied based on the rateable value of real estate. In the case of urban property, the rate is set by local authorities in a range between 0,3% to 0,45%. It is also up to the municipalities whether or not to grant a tax discount to families with dependents: €20 when there is one dependent, €40 when there are two and €70 when there are three or more dependents.

With the deadline rapidly approaching, only one-in-ten Portuguese companies have reported their beneficial owners. Late reporting incurs a charge of €35. Fines for non-compliance can range between €1,000 and €50,000. The Beneficial Owner Registry is to have three levels: a basic version open for consultation by the general public, another for the companies and their representatives, and a third for law enforcement authorities.

The initial implementation of the Beneficial Owners Registry has been postponed from April 30th until June 30th. This legislation requires the declaration of a company’s beneficial ownership data which will be shared between jurisdictions as part of the Common Reporting Standard. In the future, this information must be kept up-to-date on an annual basis.

The Stability Program for 2019-23 anticipates €31 million in additional tax revenues from the new maximum tax bracket for AIMI, applicable to Ratable Values (“VPT”) above €2 million. The Additional to Municipal Property Tax was first created in 2017 targeting luxury properties. Beyond the standard “IMI” assessment, Companies are charged AIMI at a rate of 0.4% on the sum of the Rateable Values of these properties. Residences held by entities in tax havens pay 7.5%. In the case of individual ownership, an AIMI rate of 0.7% is applied on “VPT” totals above €600,000 (or double this amount for married and cohabiting couples who opt for joint “IRS” declarations). When the “VPT” values exceed €1 million, the tax rate increases to 1%. The new bracket, created in the recent State Budget to be applied for the first time in 2019, foresees an AIMI tax rate of 1.5%, applicable to “VPT” amounts above €2 million.

In the past six months, almost 2,000 “AL” enrolments have been wound up. Many owners have stopped letting but failed to cancel their registrations due to capital gains tax liabilities. In the first quarter of 2019, new “AL” sign-ups fell nationally by 40% and by 60% in Lisbon. These numbers are likely to be understated. In total, the capital currently counts with 18,000 Local Lodging Establishments. Nationwide, there are approximately 83,000. 2020 could prove to be a year of mass exodus.